There’s something about December that makes us look back at the year that’s winding down and forward to the one that’s ahead.
Next week, the Business Journal looks ahead to 2011 with our annual preview issue.
We’re set to take a look at the major industries that make up Orange County’s economy and give a sense of what to expect in the new year.
We also pick people and companies to keep an eye on in the coming year.
Which brings us to this week’s issue, where we’re taking stock of how our picks of a year ago panned out.
Just about all of our picks were worth keeping an eye on in 2010. Some more than others. Here’s a look back at our picks of a year ago.
There’s something about December that makes us look back at the year that’s winding down and forward to the one that’s ahead.
Next week, the Business Journal looks ahead to 2011 with our annual preview issue.
We’re set to take a look at the major industries that make up Orange County’s economy and give a sense of what to expect in the new year.
We also pick people and companies to keep an eye on in the coming year.
Which brings us to this week’s issue, where we’re taking stock of how our picks of a year ago panned out.
Just about all of our picks were worth keeping an eye on in 2010. Some more than others. Here’s a look back at our picks of a year ago.
Technology
Company to Watch – Emulex Corp.
Costa Mesa’s Emulex Corp. went into 2010 under a spotlight, and not just from us.
The Costa Mesa-based maker of networking electronics set out to prove to Wall Street and investors that it could stand on its own after spurning a $912 million offer from Irvine’s Broadcom Corp. in 2009.
Emulex has made some headway—its shares are up about 120% since Broadcom’s early 2009 initial offer with a recent market value of $1 billion.
But the stock’s gain has been less dramatic in recent months, with Emulex up about 5% since the start of 2010.
Broadcom’s shares are up about 40% since the start of the year with a recent market value of $24 billion.
Emulex also has lagged behind Nasdaq, which is up about 10% since the start of the year.
That could leave some Emulex investors with a sense of remorse, according to Kaushik Roy, an analyst at Wedbush Securities Inc. in San Francisco.
“Emulex’s shares have basically stayed flat, while the overall market has gone up,” he said. “From the view of an Emulex shareholder, if they had instead taken Broadcom shares (in a deal), they would have been much richer today.”
In rejecting Broadcom’s offer, Emulex cited big growth potential in a new technology dubbed converged networking. The company makes circuit boards that bridge everyday corporate networks of servers and desktop PCs with more robust, specialized data storage networks.
Converged networking is seen as the biggest development in corporate networks in coming years and stands to save companies money by reducing storage costs.
Broadcom sought to buy Emulex in part to get in on converged networking.
But it’s still early in the game. The technology has started to take hold and could see more adoption in 2011.
Emulex made headway this year in landing customers and design wins for converged networking.
A particularly big win was with Hewlett-Packard Co. and is set to begin producing revenue soon.
Roy called it a “huge win for Emulex” at the expense of Broadcom that “should translate to market share gains.”
Emulex is “off to a good start in converged networking,” he said. “They have actually kicked out Broadcom on some customers and some product lines.”
But most of Emulex’s touted design wins haven’t shown up in the company’s financial results yet.
“They can say they have 5 million design wins, but people want to see it to believe it because of past execution issues,” Roy said.
The company has posted choppy results in the past year with some hits and some misses.
Roy, who has a “neutral” rating on Emulex’s shares, said “investors are still a little hesitant.”
Emulex got in a small jab at Broadcom in August when it bought Sunnyvale’s ServerEngines Corp.—started by former Broadcom engineers—for about $159 million in cash, debt and stock.
The two companies have worked closely for years to break into the converged networking market.
Emulex’s converged network adapters contain ServerEngines’ Ethernet chips.
—Sarah Tolkoff
Person to Watch – Henry Nicholas
Almost as soon as we picked Henry “Nick” Nicholas as a 2010 person to watch, the billionaire cofounder and former chief executive of Irvine-based Broadcom Corp. didn’t disappoint.
A year ago, Nicholas was staring down the barrel of two federal trials for stock options backdating and drug charges.
The government’s cases, which dominated much of 2009, ended with a whimper late last year and early this year.
In December 2009, just days after we had picked Nicholas as a person to watch for 2010, a federal judge threw out the government’s case against him and others citing a lack of evidence and a court finding of prosecutor misconduct.
Separate drug charges against Nicholas also were dismissed.
Nicholas, who left Broadcom in 2003, had pleaded not guilty in both cases.
In a series of stunning moves, the judge also threw out backdating charges against cofounder and Broadcom Chief Technical Officer Henry Samueli and former Broadcom financial chief Bill Ruehle.
The drama dragged on into 2010 as federal prosecutors mulled an appeal of the judge’s decision to dismiss the cases. They finally dropped them at the end of May.
The rest of 2010 was quieter for Nicholas, who spent his time on philanthropy and other charitable works.
Nicholas gives to the arts, victims’ rights, education and academic centers that aim to help steer kids into college, among other causes.
In late 2010, Nicholas found himself involved in another lawsuit over a $21 million loan deal gone bad with developer Jim Baldwin.
Nicholas also is believed to have made progress on a financial settlement with former wife Stacey this year.
—Sarah Tolkoff
Real Estate
Person to Watch – Dan Young
Dan Young might have been the happiest guy in homebuilding in 2010.
A year ago, we tapped Young—president of the Irvine Company division that plans and oversees the building of homes, parks and shopping centers on company land—as a potential newsmaker in real estate.
If anything, we underestimated the news Young’s division would make.
A year ago, Irvine Co. was preparing its first big housing development in several years, near the former El Toro Marine base.
The development, in and around its Woodbury community in northern Irvine, was the first with Young’s fingerprints on it. He took the top spot at the company’s housing development arm in late 2007, just in time for the downturn.
Young went into the project with guarded optimism and armed with a heavy amount of market research.
“There’s virtually a shortage” of new housing in Irvine, Young said at the time.
That proved prophetic. As the year went on, sales went far better than expected.
Close to 800 of some 1,100 homes put up for sale by the company this year have been sold.
A bulk of the county’s new home sales came from Irvine Co. Prices at the most recent phases of homes are up roughly 10% or so from the first batch of sales.
The homes were built through a combination of sales of land to homebuilders, Irvine Co.-backed fee-builder programs and a recently revamped company-owned homebuilder called Irvine Pacific LP.
“In nine months, we met the sales we were expecting in 18 to 24 months,” Young told the Business Journal last month.
The development brought thousands of construction and related jobs to the area. Young has described the program as “OC’s own economic stimulus package.”
“It’s been an absolutely awesome year,” Young said.
The strong level of sales has Young looking at more development in 2011 and beyond.
The company will be spending the rest of this year making “a major assessment of the market” before announcing its next steps, Young said.
Potential locations for near-term construction include Irvine Co.’s new Stonegate project in north Irvine, as well as the Laguna Crossings area in the hills near the Irvine Spectrum.
Both areas have seen grading work done in recent months. No timetable for construction has been announced to date.
—Mark Mueller
Company to Watch – First American Corp.
Santa Ana-based First American Corp., likely Orange County’s oldest company, ceased to exist in 2010.
First American’s disappearance was part of big expectations we had a year ago when we chose it as a company to watch.
In June, First American completed a split of its title insurance business from its faster growing unit that provides real estate and other business data.
It was one of two large spinoffs that OC saw this year, along with November’s split of Irvine’s Sabra Health Care REIT Inc. from Sun Healthcare Group Inc.
Both companies in the First American split got new names. The title business now operates under the banner of First American Financial Corp. and had a recent market value of about $1.5 billion.
The data business was given the CoreLogic Inc. name and had a recent market value of about $2.2 billion.
The two former siblings have reported quarterly profits since the split, after one-time write-offs. Both said they are seeing an uptick in business from mortgage refinancing, spurred by record low interest rates.
The split was several years in the making. Details on the proposed changes were first announced in early 2008. Plans were put on hold when the real estate and mortgage industries imploded. Then it took a while to get regulatory and government approvals for the split.
Executives at First American cited a desire to make money for shareholders as a reason for the split. So far, that hasn’t happened.
The combined market value for the two companies is largely the same as First American was in the months leading up to the split.
—Mark Mueller
Healthcare
Company to Watch – Vertos Medical Inc.
We picked Vertos Medical Inc. of Aliso Viejo to watch on the prospect of it rolling out a spinal treatment that possibly could catch the eye of larger device companies.
Vertos spent much of the past year launching what it calls its “mild” system, which stands for minimally invasive lumbar decompression.
The company’s devices are used to treat lumbar spinal stenosis, or a narrowing of the spinal canal.
Vertos has spent a good deal of 2010 increasing the rollout of mild, as well as training doctors on how to perform the procedure and conducting more post-market clinical studies.
Last month, Vertos said eight clinical presentations during the American Society of Regional Anesthesia and Pain Medicine’s annual meeting in Phoenix showed mild’s safety and efficacy.
The company is venture-backed, having raised $32.5 million since its 2005 start. It has revenue but declined to state how much.
Vertos closed its San Jose manufacturing and research and development facility during the year and consolidated its operations in Aliso Viejo.
The company’s other actions included expanding its executive team. New hires included Randel Woodgrift, a former official with Irvine heart valve maker Edwards Lifesciences Corp., who came on as senior vice president of operations and research and development.
Vertos’ chief executive is James Corbett, a veteran of several Orange County medical device makers.
Corbett came to Vertos in 2008 and previously was chief executive of Ev3 Inc., a medical device maker that’s now part of Covidien Ltd., a device conglomerate with a tax-friendly headquarters in Ireland that operates from Massachusetts.
—Vita Reed
Person to Watch – Richard Afable
Richard Afable clicked this year.
At this time last year, the chief executive of Hoag Memorial Hospital Presbyterian in Newport Beach was overseeing an $85 million transformation of the former Irvine Regional Hospital and Medical Center into Hoag Hospital Irvine.
Hoag Irvine opened in September. The newly renovated hospital was redone as something of a specialty hospital with a focus on orthopedics and other practices.
About half of Hoag Irvine’s 154 beds are designed for orthopedic patients. The area’s aging population brought the focus on orthopedics, according to hospital officials.
Some cardiac services also are a big part of Hoag Irvine, which doesn’t offer traditional hospital mainstays such as open-heart surgery or a maternity ward.
Hoag took over the lease of the hospital from longtime operator Dallas-based Tenet Healthcare Corp., which has cut back its Orange County operations in the past few years.
Before Hoag took over the Irvine hospital, Afable had been looking to spend as much as $390 million to expand his facility’s operations in Newport Beach.
During 2010, Afable’s actions also included instituting a lump-sum fee for hip and knee replacement surgeries at Hoag. That was part of a new effort by several Southern California hospitals to try and reduce costs through coordinating care.
—Vita Reed
Tourism
Person to Watch – George Kalogridis
We picked George Kalogridis to watch in his first full year overseeing the Disneyland Resort.
Kalogridis has dealt with theme park construction, debuted a hit water and light show and seen the tourism industry here slowly rebound this year.
As president of the Disneyland Resort, Kalogridis manages two Anaheim theme parks, three hotels and the shopping area known as Downtown Disney District.
Given Disneyland Resort’s sheer size, it is a major economic and employment engine for the city of Anaheim and all of Orange County.
Kalogridis worked in Anaheim more than a decade ago and returned late last year after overseeing an expansion at Disneyland Paris.
He’s taken over what likely is the county’s largest construction project, the $1.1 billion renovation of Disney California Adventure theme park.
When construction is done in 2012, upgrades are set to include a park-wide makeover and new rides and attractions.
This summer, water and light show World of Color debuted at California Adventure, giving Kalogridis an early win.
The show, which features scenes from Disney movies projected onto streams of water, has drawn big crowds.
World of Color has helped boost attendance at California Adventure, which has failed to live up to expectations since opening in 2001.
By late 2012, a Little Mermaid ride and the 12-acre Cars Land section are set to open at California Adventure.
For now, Kalogridis is balancing construction with daily operations at California Adventure.
At first, he said he was worried about the impact of construction on visitors. But many seem to be interested in the work itself, he told the Business Journal earlier this year.
Kalogridis has faced other issues this year.
In February, some hotel union members staged a hunger strike outside Disney’s Grand Californian hotel as well as at Walt Disney Co.’s Burbank headquarters.
He’s also worked with the city of Anaheim and other government officials. He hired some laid off Anaheim workers and leased Orange County Transportation Authority buses and hired OCTA drivers when the transportation agency was making its own cuts.
—Kari Hamanaka
Hotel to Watch – St. Regis Monarch Beach Resort
As we had predicted a year ago, the story of the St. Regis Monarch Beach Resort in Dana Point took another turn in 2010 when it was bought by one of its debt holders.
In April, Seattle-based Washington Real Estate Holdings LLC bought the St. Regis in a deal that valued the hotel at an estimated $235 million.
Washington Real Estate, a private real estate investment company, held a portion of $230 million in primary debt on the hotel along with Prudential Financial Inc. in Newark, N.J.
Citigroup Inc., which held about $70 million in secondary debt on the hotel, foreclosed in 2009 after former owners Newport Beach-based Makar Properties LLC and San Francisco hedge Farallon Capital Management LLC defaulted on loan payments.
The deal brought a degree of ownership stability to the St. Regis, which still is working its way back from the downturn.
The hotel became known for a 2008 meeting held there by New York-based American International Group Inc. shortly after the insurer received a $90 billion federal bailout.
With business travel and meetings still off from where they were before the recession, St. Regis has looked to weddings to fill the gap, booking more than 100 this year.
—Kari Hamanaka
Retail
Company to Watch – Pacific Sunwear of California Inc.
A year clearly hasn’t been enough for Anaheim-based mall retailer Pacific Sunwear of California Inc.
A year ago, we picked Pacific Sunwear to watch because it had a new chief executive in Gary Schoenfeld, who was brought in to help turn around the struggling chain.
Pacific Sunwear, which sells surf- and skate-inspired clothing at stores across the country, has seen two years of slumping sales. The company continued to post declines this year.
In the latest example, same-store sales for much anticipated Black Friday fell 2% from a year earlier.
Earlier in November, Pacific Sunwear warned investors of a larger than expected loss for the three months through January.
A lot was riding on Schoenfeld and what he could do for Pacific Sunwear during his first full year on the job.
He’s known for his work turning around Cypress-based Vans Inc. before North Carolina’s VF Corp. bought Vans in 2004.
Schoenfeld made several key hires this year starting with January’s appointment of former Levi Strauss & Co. executive Robert Cameron as senior vice president of marketing.
But Cameron didn’t last too long—he left in October.
More recently, Schoenfeld hired Eric Fong, vice president of merchandise planning and allocation, and Mondy Beller, vice president of e-commerce.
Improved customer service, more sales of shoes and a greater emphasis in stores of Orange County brands such as Costa Mesa-based Volcom Inc. and Huntington Beach-based Quiksilver Inc. have been the focal points of Schoenfeld’s strategy to win back fickle teens more interested in edgier, street-inspired clothing.
There have been some gains. Clothing sales for men and women have picked up this year with Pacific Sunwear saying it expects to see more gains next year.
—Kari Hamanaka
Finance
Company to Watch – Sunwest Bank
We were a year late from hitting it big with our pick of Sunwest Bank as the finance company to watch in 2010. But the bank still made enough positive headlines this year to warrant a thumbs up.
While Tustin-based Sunwest stayed quiet on the acquisition front in 2010, its 2009 purchases helped the bank increase market share and assets.
Sunwest Bank, the fourth largest bank based here, grew assets nearly 14% to $646.2 million through September, one of the biggest gains by percentage and actual dollars of any OC bank.
Last year, Sunwest acquired three failed banks through the Federal Deposit Insurance Corp., including Pacific Coast National Bank of San Clemente, formally the 19th largest bank based here.
“Certainly that acquisition boosted our growth, but during that same period we also experienced very good organic growth,” said Glenn Gray, chief executive of Sunwest Bank. “During the latter half of 2009, we made some great additions to our relationship management staff, and they in turn generated a lot of new business for the bank.”
Sunwest added about $150 million in deposits after nabbing four veteran bankers who brought clients with them.
Through the first half of the year, Sunwest posted the highest profit of any homegrown bank at $4.8 million. Sunwest’s profit was up 224% from a year earlier.
The bank avoided speculative real estate and construction lending during the 2000s boom, which put Sunwest in a position to pick up some pieces of the wreckage.
The bank, which boosted loans 28% to $324.8 million as of September 30, has written off only a handful of bad loans this year.
—Chris Casacchia
Person to Watch – Walter Schindler
Venture capitalist Walter Schindler had his day in the sun in 2010.
The managing partner of Irvine’s Sail Venture Partners LLC said he saw each of the 10 companies he helped fund double revenue in 2010 from a year earlier.
That boosted the value of the firm’s $90 million Sail II fund by 47% in unrealized returns from 2009. Its $52 million inaugural Sail I fund gained 10%.
“We had a banner year,” Schindler said.
Investments include Ice Energy, a Windsor, Colo., energy storage company that has an office in Costa Mesa; Irvine-based Oryxe Energy International Inc., which produces fuel additives that reduce emissions; Corona-based Paragon Airheater Technologies Inc., which reduces carbon emissions and fuel consumption in factories that use fossil fuel; WaterHealth International, an Irvine developer and marketer of decentralized water purification systems; Lake Forest-based M2 Renewables, a wastewater and energy conservation company; and Irvine’s FlexEnergy LLC, which generates clean energy from greenhouse gases.
FlexEnergy in August unveiled a 10-ton power station in Riverside County that converts landfill waste gases to electricity. In October it signed a letter of intent to acquire the assets of the Energy Systems business of Ireland’s Ingersoll Rand Co.
Schindler expects revenue for each of Sail’s portfolio companies to double in 2011, with an initial public offering and other exits in the works. He said Xtreme Power Inc., a battery maker based in Kyle, Texas, is expected to go public by 2012.
Sail in July co-led a $29.5 million financing round for Xtreme Power with Larchmont, N.Y.-based Bessemer Venture Partners that included Michigan’s Dow Chemical Co.’s venture capital group.
As part of the deal, Schindler joined Xtreme Power’s board.
The financing supports technology development, production expansion and large-scale power projects.
It hasn’t all been rosy for Schindler and Sail though. Only one of the firm’s portfolio companies has turned a profit so far, four less than Schindler speculated a year ago.
“That’s been more challenging,” Schindler said.
Last week Sail moved its Costa Mesa headquarters to a 4,000-square-foot space in Irvine to accommodate future growth and hiring.
—Chris Casacchia
Government
Person to Watch – Wayne Quint
Wayne Quint, president of the Association of Orange County Deputy Sheriffs, had to play a lot of defense in 2010. But our government person to watch managed to protect his membership, for now, from big cuts in jobs or benefits.
In February, the deputies and county supervisors agreed to a three-year contract that froze wages, required deputies to kick into their retirement plan and raised the retirement age for new hires, in exchange for the county paying more for healthcare.
Saying the savings were inadequate, Supervisor John Moorlach cast the lone dissenting vote against the deal.
Quint’s union backed losing candidates Bill Hunt for sheriff and Harry Sidhu for supervisor, and passed on a rematch against Moor-lach, who won unopposed.
While some professional safety groups around the state backed gubernatorial candidate Meg Whitman, the California Coalition of Law Enforcement Associations, which Quint also heads, endorsed winner Jerry Brown.
In September Quint got a judge to halt, pending appeal, Sheriff Sandra Hutchens’ plan to hire more civilian jailers.
Other issues remain, including an ongoing court challenge by the Board of Supervisors to the retroactive pension benefits granted to deputies in 2001, set for a hearing next month.
And economic forces continue to squeeze the sheriff’s budget.
Quint has his members’ support: He recently was re-elected president by both the deputy sheriffs association and the California coalition.
—Rick Reiff
